The Psychology of Speculation

It may be set down as an axiomatic truth that no one can learn the art of making money in the stock market by reading statistics, charts, precedents, theoretical disquisitions and instructions. Of course it is not needful, nor would it be any more practicable than it is necessary, to set forth any fixed rules or maxims governing one's procedure in any other line of business or any other profession, since no one could use them advantageously without the requisite qualifications, such as adaptability, shrewdness and practice. Hundreds of different combinations of cards are laid out in books of instructions on auction bridge, with explicit directions as to how to bid and play the hands, yet nobody ever heard of a good bridge player being made solely from book instruction. One reason is that there are actually millions of combinations of cards. Also in stock trading there is an indefinite number of needful "don'ts" which the most resourceful person can neither contemplate nor anticipate. Every stock market cycle shatters some precedent; every era produces new phenomena. Everyone who has ever studied a book of instructions on how to play golf knows how impossible it is to take up any golf club and make it perform according to schedule.

A firm stance, feet well apart, body under full control, the right knee stiff, the left arm almost rigid as it follows the right in a low backward swing; and most important of all, the eye firmly fixed on the ball, while the club whips through the air, and after lifting the ball, follows on through, carrying both arms forward to their full length, and many other things which I never could do, and cannot now recall; all these directions the would-be player will learn as he knows his A, B, C's; but in his intense eagerness to swat the ball he disregards most, or all, of the stated essentials, and at the moment of impact, while his club is ploughing up the sod two or three inches behind the ball, his eyes are cast heavenward in fervent anticipation of watching its flight. Likewise the speculator figures his profits long before they materialize. The most important thing in golf, and the hardest thing to learn, is to keep the eye on the ball while in the act of hitting it; and the hardest thing to learn in stock trading is to keep the eye _off_ the market, hold firmly and patiently to good resolutions, _and not try to get rich too quickly_. Both look to be easy, but --